Week 5_Deepening Financial Markets

Week 5_Deepening Financial Markets - Deepening Financial...

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Deepening Financial Markets Evolution, Challenges & Debates
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AGENDA What is Microfinance? Issues and Debates The ‘Missing Middle’
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Definition of Microfinance Financial services for people living near or below the poverty line who traditionally have not had access to formal financial institutions Microfinance client in Dominican Republic who makes and sells coconut oil
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Why is access to Microfinance important? Poor need capital and a safe place to save $ in order to: – Run their businesses – Smooth consumption – Manage risks Lack of capital - largest constraint for pursuing alternate livelihood options and increasing income levels The poor are left out of formal financial sector – only options are very expensive
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Evolution of the Microfinance Industry poverty alleviation tool Modern MF began as a development tool for poverty alleviation with institutions like Grameen, Accion & FINCA Focus on creating sustainable development-- move away from giving hand-outs to providing opportunity Many NGOs were involved & money for loans came via donations to the NGOs & MFIs Grameen Bank center meeting, rural Bangladesh
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Evolution of the Microfinance Industry towards commercialization Some entities saw access to capital as main constraint to growth Began to professionalize & commercialize so they could capture savings to fuel on- lending & access loans for further growth Assumption was that MF was effective poverty tool & the more people reached, the better
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This note was uploaded on 02/21/2010 for the course AEM 4420 at Cornell University (Engineering School).

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Week 5_Deepening Financial Markets - Deepening Financial...

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